Full Election Roundup

Democratic presidential candidate Hillary Clinton has been cleared again by the FBI after a review of new e-mails, but strategists wonder how much of an edge this will give her over Republican rival Donald Trump with the election just one day away.

FBI Director James Comey, in letter to lawmakers, said yesterday that FBI hasn’t changed conclusions reached in July with respect to Clinton e-mail review

POSSIBLE SCENARIOS

Market continues to price in Clinton presidential victory; split government remains likely and would largely be seen as a continuation of the status quo

MXN widely seen as most sensitive currency to election results; Bloomberg strategist George Lei offers guidance on what levels to watch heading into Election Day

Clinton win to drive a “broad-based uptick in risk appetite as seen by recent moves in NZD, AUD; higher equities and bond yields

‘‘If Clinton wins North Carolina or Florida in the first round of polling, the election’s pretty much over’’ as markets ‘‘won’t have to stay up all night and watch intently,’’ however markets will get ‘‘very jittery’’ if she loses those states as well as Ohio

‘‘Hard to say’’ how much of a positive impact latest FBI news clearing Clinton will be for her ‘‘this late in the game’’ ** USD to underperform vs safe haven currencies like JPY ‘‘first and foremost,’’ followed by CHF and EUR on Trump win

CNH and CNY’s correlations with DXY are highest among Asian currencies in past 6 months

Such high correlation will hold under Clinton’s victory and will drive CNH down as risk sentiment stabilizes while Fed is likely to stick to its December rate hike plan; may send yuan past 6.8 vs USD in “short term”

If Trump wins, CNH may find some relief from USD sell- off but elevated risk aversion and capital outflow from Asia and Trump’s unfriendly policy toward China may spur mkt to rebuild short CNH position

Evercore ISI (Krishna Guha, Nov. 7 note)

Near-full employment and low rates make U.S. election outcome and fiscal policy more influential for economy, USD and rates than the Fed, as low neutral rates make it “very hard” for Fed to hike considerably

Market is re-factoring the possibility a Clinton win after clarity from FBI, thus lifting USD/JPY, USD/CNY and USD/SGD higher

Actual outcome of U.S. election is all that matters; harder to read market moves now as election day is so close

Oanda (Stephen Innes)

Knee-jerk election reaction by Asian currencies to be 3% at most; export-driven KRW, TWD and yuan vulnerable to election

Flows will return to IDR, INR soon after thanks to relatively attractive yield

Wolfe (including Chris Senyek)

Election outcome won’t change bearish view on equities as “shaky fundamentals” have caused higher volatility and stock market weakness over past two months, though Trump’s rising odds have contributed to heightened volatility more recently as well

Writing about a subject is the best
way to educate yourself about it, and when I flick through past work I remember how much
they taught me, if no one else. Mainly they taught me that I didn’t know very much. But they
also taught me that most other people didn’t know much either. Thus, some key themes
which stand out include the illusory control of policy makers, the presumed knowledge of
those looking to them to actively do good, the ease with which we fool ourselves, and how
best to protect capital in the face of such unavoidable uncertainty. -- Dylan Grice